ONTARIO COURT OF APPEAL SUMMARIES (AUGUST 7 – 11, 2017)

Good afternoon,

Following are the summaries for this week’s two civil decisions of the Court of Appeal for Ontario.

In RBC Dominion Securities Inc. v. Crew Gold Corporation, the court applied familiar principles of contractual interpretation in affirming the lower court’s decision that had determined that RBC was not entitled to be paid a fee pursuant to an investment banking agreement when it had no involvement in the transaction that was ultimately concluded by its client.

In York University v Markicevic, the Court of Appeal granted security for costs of an appeal even though the appeal was found not to be frivolous, on the basis taht the appellant had been found liable in fraud and had attempted to put his assets beyond the reach of creditors, and had not challenged those findings.

Have a great weekend.

John Polyzogopoulos
Blaney McMurtry LLP
jpolyzogopoulos@blaney.com
Tel: 416 593 2953
http://www.blaney.com/lawyers/john-polyzogopoulos

Table of Contents

Civil Decisions

RBC Dominion Securities Inc. v. Crew Gold Corporation, 2017 ONCA 648

York University v. Markicevic, 2017 ONCA 651

For Criminal Decisions, click here.

Civil Decisions

RBC Dominion Securities Inc. v. Crew Gold Corporation, 2017 ONCA 648

[Weiler, van Rensburg and Huscroft JJ.A.]

Counsel:

J. Devereux and M. Bookman, for the appellants

A. Crawley and N. Vandervoort, for the respondent

Keywords: Contracts, Interpretation, Standard of Review, Palpable and Overriding Error, Factual Matrix, Plain Meaning, Commercial Reasonableness, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, Kentucky Fried Chicken v. Scott’s Food Services Inc. (1998), 41 B.L.R. (2d) 42 (Ont. C.A.)

Facts:

The appellants, RBC Dominion Securities Inc. and Royal Bank of Canada Europe Limited (together “RBC”), contracted with  the respondent, Crew Gold Corporation (“Crew”), to provide investment banking services (the “Agreement”).  RBC provided services under the Agreement to assist Crew in developing and implementing “strategic alternatives”. The Agreement provided for service fees based on specific work performed by RBC, and for a “Success Fee”, payable on completion of a “Transaction”, as defined by the Agreement. The agreement defined a “Transaction” as follows:

The Transaction “may involve (i) a sale of all or a substantial portion of the shares, business or assets of the Company to a third party, (ii) an investment by a third party in the Company that results in a change of control of the Company or (iii) an amalgamation, arrangement or other business transaction involving the Company and a third party to effect such sale or disposition”.

In the course of the Agreement, Crew, then a public company, was the subject of a takeover by Endeavour Financial Corporation (“Endeavour”) and OAO Severstal (“Severstal”) via the TSX and Oslo Stock Exchange, an event that was not anticipated by either party. The sole issue between the parties was whether, under the Agreement, RBC was entitled to a Success Fee in respect of any or all of the transactions involved in the takeover, even though it played no part in the transactions. RBC was of the view that Crew owed them the Success Fee, per the terms of the Agreement, and therefore sued Crew for its outstanding Success Fee Invoices.

At trial, RBC argued that the language of the Agreement was sufficiently broad and general so as to permit the claim, even though RBC was not involved in the Endeavour and Severstal purchases of Crew shares. Alternatively, RBC argued that the separate purchases by Endeavour and Severstal amounted to the sale of a “substantial portion of the shares… of the Company to a third party”. RBC relied on what it asserted was the expanded definition of Transaction in the definition of “Transaction Proceeds” to argue that these purchases constituted Transactions under the Agreement. RBC also asserted that, unlike the other fees payable under the Agreement, there was nothing to tie the Success Fee to services provided by RBC; and that the payment of the Service Fee depended only on the closing of a Transaction. Finally, RBC relied on the tail provision to argue that it was entitled to a Success Fee so long as a Transaction was concluded within 12 months of the termination of the Agreement, regardless of RBC’s contribution.

The trial judge found in favour of Crew. First, he noted there was no ambiguity in the language used in respect of the terms “Transaction” or “Success Fee”. He held that, in interpreting the term “Transaction” and determining the intention of the parties at the time the Agreement was drawn, it was too limiting to simply have regard to the preamble and the extended definition found in “Transaction Proceeds”, as proposed by RBC, and that regard must be had to the Agreement as a whole.

The trial judge concluded that RBC was not intended to receive a Success Fee unless there was some causal link between its activities and the completed transaction, even though RBC was not required to introduce the successful purchaser to the transaction and even though RBC’s involvement was not required to be a material cause of the transaction.

The trial judge then reviewed the factual matrix. He found that the entire thrust of RBC’s strategy after the debt restructuring was to maximize shareholder value by creating and rolling out an RBC Alternative, namely a process for the sale of Crew’s assets or control shares. RBC’s presentations all emphasized some form of an en bloc sale of assets or shares through a process orchestrated by RBC. RBC never spoke of the possibility of a third party purchase through stock exchanges. Further, it was “not on anyone’s radar” that any one of the RBC Alternatives would include a purchase of control through the acquisition of sufficient shares on the Oslo Stock Exchange, or that any purchaser would acquire a significant interest in Crew without a due diligence inquiry, which would have involved RBC.

RBC appealed.

Issues:

(1) Did the trial judge make extricable errors of law in his interpretation of the Agreement?

Holding: Appeal dismissed.

Reasoning:

(1) No. RBC advanced three separate arguments, which the Court of Appeal addressed in turn. In doing so, the court applied the deferential standard of review of “palpable and overriding error”, which is the standard applicable to issues of contractual interpretation involving issues of mixed fact and law (Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633). Furthermore, the court is to interpret a contract as a whole and in a way that gives meaning to all of its terms (Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673).

i) The trial judge failed to consider the plain words of the Agreement in the context of the Contract as a whole

The Court held that RBC was essentially advancing the same arguments on this issue that it had a trial, and that the trial judge’s interpretation of these arguments was reasonable and in accordance with the accepted principles of contractual interpretation. Indeed, the Court noted that RBC’s approach to interpreting the contract was too narrow, and that had the trial judge adopted RBC’s approach, that would have constituted an extricable error of law. Similarly, the Court rejected RBC’s argument that the trial judge ignored certain of the Agreement’s provisions and certain case law.

ii) The trial judge improperly relied on the parties’ subjective intentions and failed to consider the objective surrounding circumstances

The Court rejected RBC’s argument that the trial judge relied on any evidence of the parties’ subjective intentions in interpreting the Agreement. In the Court’s view, the passages RBC relied on (which appeared to be every occasion where the trial judge used the words “intention” or “intended”) provided no support for this argument.

The Court put it quite bluntly that there was simply no merit to this ground of appeal. The trial judge did not make findings as to the parties’ subjective intentions in entering the Agreement, nor did he allow evidence of subjective intention to oust the plain words of the Agreement.

iii) The trial judge failed to consider the commercial reasonableness of the interpretation of the Agreement advanced by RBC

RBC argued that the trial judge adopted an interpretation of the Agreement that was not “in accordance with sound commercial principles and good business sense”, insofar as he failed to recognize the business reasons for allocating risk in contracts by providing for payment based on the occurrence of an event rather than services rendered.

The Court repeated its caution in Kentucky Fried Chicken v. Scott’s Food Services Inc. (1998), 41 B.L.R. (2d) 42 (Ont. C.A.) that the construction of contracts in accordance with sound commercial principles and good business sense must be performed objectively, rather than from the perspective of the contracting parties.

Notwithstanding that the trial judge did not analyze the parties’ arguments with respect to RBC’s expert evidence under a separate heading, the Court held that this did not mean that he ignored the commercial realities in interpreting the Agreement. Considerations of commercial reasonableness permeated his reasons. The trial judge made a specific finding on the evidence that was available that the parties anticipated a sale process. The expectation was that RBC would have provided services in connection to the process culminating in the closing of a Transaction to warrant payment of a Success Fee.

The Court therefore held that the trial judge’s interpretation was not commercially unreasonable and made commercial sense.

York University v. Markicevic, 2017 ONCA 651

[Epstein J.A. (In Chambers)]

Counsel:

W. C. McDowell and B. Kolenda, for the moving party

D. Zacks and J. Spotswood, for the responding party

Keywords: Civil Procedure, Appeals, Security for Costs, Fraud, Rules of Civil Procedure Rules 61.06(1)(a) to (c), 56.01

Facts:

After a lengthy trial, Michael Markicevic (“Markicevic”) was found to have defrauded York University (“York”) and was ordered to pay over $1.8 million in damages plus $1.37 million in costs. He was also found to have made fraudulent conveyances to his partner and daughter of certain property he owned. At the material time, Mr. Markicevic was the Assistant Vice-President of York’s Campus Services and Building Operations.

He appealed on two grounds: one concerning the implications of a mutual release  signed by all parties, and the other concerning whether York’s claims against him were statute-barred. York subsequently moved for security for costs of this appeal.

Issues:

(1) Should the court exercise its discretion to order security for costs?

Holding: Motion granted.

Reasoning:

(1) Yes. Epstein J.A. noted that according to Rule 61.06(1)(a) of the Rules, the court has the discretion to order security for costs where the appeal is frivolous and vexatious, and the appellant has insufficient assets in Ontario to pay the costs of the appeal. Applying the jurisprudence of Rule 56.01 (regarding security for costs at trial) by analogy, Epstein J.A. held that a finding that the responding party fits within the relevant provision of Rule 61.06 is not dispositive; rather, it triggers an inquiry into whether an order for security for costs would be just in the circumstances.

With respect to the facts of this case, Epstein J.A. was of the review that although Markicevic faced an “uphill battle” with respect to this appeal, his arguments with respect to the limitation period and the release were not without merit. Accordingly, she found that his appeal was neither frivolous nor vexatious. Similarly, the record made it clear that Markicevic was effectively without assets; notwithstanding that he had an interest in two separate properties, the numerous charges on and court orders in relation to them were such that Markicevic was unable to access the equity in those homes.

Turning to Rule 61.06(1)(c), Epstein J.A. noted that the rule also afforded her the discretion to order security for costs for “other good reason”. Canvassing the jurisprudence, Epstein J.A. noted that fraud has repeatedly been found to constitute “other good reason” and that notwithstanding Markicevic’s impecuniosity – along with the fact that an order for security for costs would potentially impair his ability to pursue his appeal – there were good reasons to order security for costs here.

In Epstein J.A.’s view, the fact that Markicevic did not challenge the finding of fraud, including a finding that he had attempted to put his assets beyond the reach of creditors, and other related findings favoured ordering security for costs. The fraud related to the purpose for ordering security, and permeated the entire analysis under r. 61.06(1), insofar as it was this same fraud that had largely contributed to his becoming impecunious. Epstein J.A. concluded by noting that although there were several factors militating in Markcevic’s favour (as outlined above), the unique circumstances of this case provided a compelling reason to make an order for security for costs.

Criminal Decisions

R v. Mallozzi, 2017 ONCA 644

[Feldman, Pardu and Benotto JJ.A.]

Counsel:

J. Presser and J. Marshman, for the appellant

B. Puddington, for the respondent

Keywords: Criminal Law, Production of Marijuana, Right to Trial, Unreasonable Delay, Mistrial, Defence Delay, Stay of Proceedings, s.11(b) of the Canadian Charter of Rights and Freedoms, R. v. Jordan, 2016 SCC 27, R v. Cody, 2017 SCC 31, R. v. Morin, [1992] 1 S.C.R. 771, R. v. Coulter, 2016 ONCA 704, R v. Gordon, 2017 ONCA 436

R v. A.N. (Publication Ban), 2017 ONCA 647

[Hoy A.C.J.O., Simmons and Brown JJ.A.]

Counsel:

C. Mainville, appearing as duty counsel

A.N., acting in person

T. Kozlowski, for the respondent

Key Words: Criminal Law, Sexual Assault, Indecent Assault, Evidence, Credibility, R. v. J.J.R.D. (2006), 215 C.C.C. (3d) 252 (CA), R. v. Kienapple, [1975] 1 S.C.R. 729

 R v. Lavergne (Publication Ban), 2017 ONCA 642

[Laskin, Simmons and Pardu JJ.A.]

Counsel:

A. Weisberg, for the appellant

C. Harper, for the respondent

Key Words: Criminal Law, Sexual Assault, Plea Bargain, Ineffective Assistance of Counsel, Sentencing, R. v. G.(D.M.), 2011 ONCA 343

R .v. Nicholas (Publication Ban), 2017 ONCA 646

[Gillese, Huscroft and Trotter JJ.A.]

Counsel:

D.J. Brodsky, for the appellant

J. Speyer, for the respondent

Key Words: Criminal Law, Break & Enter, Sexual Assault, Unreasonable Search and Seizure, Right to Counsel, Unlawful Detention, Canadian Charter of Rights and Freedoms, ss. 8 and 10(b)

R. v. Orlandis-Habsburgo, 2017 ONCA 649

[Doherty, Pepall and van Rensburg JJ.A.]

Counsel:

P. Lewin and J. Lloyd, for the appellants

B. Reitz, for the respondent

D. Guttman and M. Flanagan, for the intervener, Attorney General of Ontario

Key Words: Criminal Law, Production of Marijuana, Possession for the Purposes of Trafficking in Marijuana, Possession of the Proceeds of Crime, Search Warrants, Unreasonable Search and Seizure, Reasonable Expectiation of Privacy, Canadian Charter of Rights and Freedoms,  ss. 8 and 24(2), R. v. Gomboc, 2010 SCC 55, [2010] 3 S.C.R. 211

R. v. Robinson, 2017 ONCA 645

[Doherty, MacFarland and Paciocco JJ.A.]

Counsel:

J. Lockyer and J. Gemmell, for the appellant

C. Bartlett-Hughes, for the respondent

Key Words: Criminal Law, First-Degree Murder, Mens Rea, Juries, Instructions, Reasonableness of Verdict, , Evidence, Subsequent Conduct

Keywords: Criminal Law, Production of Marijuana, Right to Trial, Unreasonable Delay, Mistrial, Defence Delay, Stay of Proceedings, s.11(b) of the Canadian Charter of Rights and Freedoms, R. v. Jordan, 2016 SCC 27, R v. Cody, 2017 SCC 31, R. v. Morin, [1992] 1 S.C.R. 771, R. v. Coulter, 2016 ONCA 704, R v. Gordon, 2017 ONCA 436

R. v. Riley, 2017 ONCA 650

[LaForme, Watt and Trotter JJ.A.]

Counsel:

J. Wilkinson and M. Salama, for the appellant, Phillip Atkins

J. Lockyer and A. Ostroff, for the appellant, Jason Wisdom

J. Presser and N. Yanful, for the appellant, Tyshan Riley

R. Hubbard, K. Papadopoulos and H. Freeman, for the respondent

Keywords: Criminal Law, First Degree Murder, Unreasonable Search and Seizure, Canadian Charter of Rights and Freedoms, s. 8 and s. 24(2), Jury Selection, Challenge for Cause, Criminal Code of Canada, s. 640(2.1) and (2.2), Evidence, Bad Character, Joinder, Canada Evidence Act, R.S.C., 1985, c. C-5, s. 9(1), R. v. Vectrovec, [1982] 1 S.C.R. 811, R. v. Khela, 2009 SCC 4, R. v. Grant, 2009 SCC 32, R. v. Sherrat, [1991] 1 S.C.R. 590, R. v. Find, 2001 SCC 32, R. v. Litchfield, [1993] 4 S.C.R. 333, R. v. Last, 2009 SCC 45, R. v. Rojas, 2008 SCC 56, R. v. Daley, 2007 SCC 53, R. v. Goldhart, [1996] 2 S.C.R. 463, R. v. Perciballi (2001), 54 O.R. (3d) 346 (C.A.) R. v. Noureddine, 2015 ONCA 770, R. v. Husbands, 2017 ONCA 607, R v. Grant, 2016 ONCA 639, R. v. Murray, 2017 ONCA 393, R. v. V. (W.), 2017 ONCA 546, R. v. Brown (2002), 166 C.C.C. (3d) 570 (Ont. C.A.), R. v. Betker (1997), 115 C.C.C. (3d) 421 (Ont. C.A.), R. v. Moore-McFarlane (2001), 160 C.C.C. (3d) 493 (Ont. C.A.), R. v. Hubbert (1975), 29 C.C.C. (2d) 279 (Ont. C.A.), R. v. Gayle (2001), 154 C.C.C. (3d) 221 (Ont. C.A.), R. v. Rose (1997), 100 O.A.C. 67 (Ont. C.A.), R. v. Roks (2011), 274 C.C.C. (3d) 1 (Ont. C.A.), R. v. White, 2014 ONCA 64, R. v. James (2006), 84 OR (3d) 227 (C.A.), R. v. Kostyk, 2014 ONCA 447, R. v. Bradey, 2015 ONCA 73, R. v. Zebedee (2006), 81 O.R. (3d) 583 (C.A.), R. v. Rowe, 2011 ONCA 753, R. v. Murray, 2017 ONCA 393, R. v. Tran, 2010 ONCA 471, R. v. Gelle, 2009 ONCA 262, R. v. Figueroa, 2016 ONCA 645, R. v. Largie, 2010 ONCA 548, Trustcott (Re), 2007 ONCA 575

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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